When a person falls behind on their debt, things can be overwhelming. They may be laden down with harassing calls from debt collectors. Or worse, they might even have to go to court because a creditor, fed up with not getting their money, decided to take legal action. A person’s difficulties with debt are even more exacerbated if they are trying to buy or rent a house because of their bad credit report and credit scores. For all of these reasons many will be tempted to turn to credit repair companies. However, this may not be a wise choice.
When consumers have problems with credit, excessive debt and a bad credit profile or credit report there are a number of techniques that can be used to help the situation. Some of the solutions involve credit counseling, debt consolidation and credit repair. These are not the same processes. Credit repair companies generally engage in the sole process of removing bad credit in someone’s credit report and more often than not they either do not accomplish the job and / or charge exorbitant fees to do this. These services are generally very ineffectual and costly and are designed to take advantage of consumers in financial trouble.
The biggest issue with credit repair services and agencies is that if they do ‘fix’ one’s credit they are using means that a person could do themselves for free. This involves sending dispute letters, something that is easy to do. A basic dispute letter will inform a creditor that they must provide documentation proving a person owes money to them. They must also correct any errors that are listed in the letter. If the creditor fails to do either of these things, it is possible that a person can get any debt associated with them erased.
This process is without question time consuming and has to be performed in a fairly precise manner to make sure the debts is identified properly, the letter is sent according to the standards established by the Fair Credit Reporting Act and that the proper follow up is completed. The amount of work involved may warrant the need for a assistance or may not, the problem with most all credit repair companies is that there fees are excessive and there results are generally underwhelming.
So, if sending dispute letters is so easy, why do people still go to credit repair companies? It’s usually because they believe the credit repair company has access to means that they don’t have access to. This is just not true. Even credit repair companies that are legal are limited to just sending out dispute letters. Consumers can do this themselves, even if they don’t know how to write one. This is because numerous sample dispute letters are available all over the Internet.
Some credit repair companies also use a scam technique known as file segregation to try to ‘fix’ the credit of their customers. The process of file segregation begins with the credit repair company asking the customer to get an employee identification number, (known as EIN). This is a form of identification that works like a Social Security number; it is often assigned to employees. Anyway, once an EIN has been obtained, the customer uses it to establish a new credit identity. Different contact information is used to make it harder for creditors to track the customer down.
The problem with trying to fix credit in this manner is that it is considered fraudulent. An individual cannot establish a new identity with the intent to escape debt associated with a previous identity. And though having an EIN is perfectly legal, things appear fraudulent because of the way different addresses are used. When the government notices what is going on, it is possible that individuals associated with the scam, (who are actually the victims), get criminally prosecuted. The credit repair companies may also get in trouble, but who cares what happens to them.
All in all, the process of credit repair is one that may take time and requires attention to detail. However, some debtors will be either lucky enough or have the right information and may actually get some of their credit expunged through the process of sending dispute letters. But the likelihood of getting all of one’s debt eliminated through an expensive credit repair company is unlikely. The one real solution is being patient, work on the debts yourself, pay back bills over time, consider debt consolidation or even bankruptcy if the bills are more than what one can handle and do your own research to solve the problem. The tools to fix your credit and debt problems are easily available to you.
Editor at CreditRepairExpert
Steven is a Certified Financial Planner (CFP) and Certified Credit Counselor (CCC) and joined CreditRepairExpert in June 2016 as a Credit Repair Adviser to continue his mission of making a difference in the world. Everyday, Steven speaks with individuals and families in the online credit repair community to answers questions and offer help people on their journey to repair their credit rating. If you have a story idea for Steven or you would like help with credit repair, please email him at email@example.com.